A battle in Kentucky over state funds going to faith-based child-care institutions that openly proselytized to children appears to be nearly over. In a settlement announced Wednesday, child-care agencies that contract with the state are barred from discriminating against children on the basis of religion. The settlement also requires agencies to consider alternative placement if a child or guardian objects to a provider’s religious affiliation and bans agencies from pressuring or coercing a child into participating in worship or religious services.

The settlement was a result of a lawsuit between state officials and a group of citizens represented by the American Civil Liberties Union and Americans United for Separation of Church and State. The suit was first filed in 2000 by four Kentucky residents, including Alicia Pedreira, a lesbian who claimed religious discrimination caused her to lose her job with the Kentucky Baptist Homes for Children, now known as Sunrise Children’s Services. Sunrise cares for abused and neglected children through residential centers and foster care placement. The company is the largest private child-care provider in Kentucky and handled a significant number of the state’s placements. According to reports, Sunrise has benefited from massive taxpayer support; since the case began, the Baptist-affiliated ministry is reported to have received substantially more than $100 million in government funds, and in fiscal year 2011, the state paid $14.8 million of the ministry’s $24.7 million in expenses.

In 2009, an appeals court dismissed Pedreira’s claim against Sunrise but allowed the claims challenging the public funding of faith-based institutions to proceed. According to the lawsuit, Sunrise employees pushed the Baptist faith on children of all beliefs. In documents filed in support of their lawsuit, attorneys for the plaintiffs detailed numerous examples of Sunrise’s focus on religion in delivering care. Among other things, Sunrise’s president was said to have touted the agency’s success in converting children. The agency also calls itself “Christ centered” and refers to the foster parents it recruits as “in-home missionaries.” According to attorneys for the plaintiffs, documents obtained through the lawsuit revealed that numerous children, including Catholic, Pentecostal, Jehovah’s Witness, and atheist youths, felt pressured into giving up their beliefs. Interviews with children conducted by the Children’s Review Program, a private contractor hired by Kentucky officials to monitor programs for children, identified numerous instances in which young people complained about being forced to attend Baptist services or said they were not permitted to attend services of other faiths.

The state cancelled the review program in 2008, citing budget concerns.

Under the terms of the settlement, child-care agencies that contract with the state will be forbidden to discriminate in any manner against children based on their religious views or to pressure children to participate in religious worship or instruction. Publicly funded child-care agencies and foster homes across the state also will be barred from placing religious items in children’s rooms without their consent, and religious materials will be given only to children who request such materials. While the settlement immediately stems from the Sunrise complaint, the terms broadly cover any agency doing business with the state.

Additionally, prior to placing a child with a religiously affiliated child-care agency or foster home, the state will inform children and parents of the provider’s religious affiliation, and if the child or parent objects, the state will endeavor to provide an alternative placement, except in certain special circumstances. “We are pleased with this settlement,” said Americans United Associate Legal Director Alex J. Luchenitser in a joint statement. “It will ensure that vulnerable youths in Kentucky’s child-care system are free to follow and practice their own faiths, or no faith at all, and that no religion is forced upon them.”

“This strong agreement promotes the basic constitutional principle that taxpayer funds should never be used to underwrite religious indoctrination,” said Daniel Mach, director of the ACLU Program on Freedom of Religion and Belief, in the same statement.

Furthermore, thanks to the settlement, the state will be required to extensively monitor state-funded child-care agencies to make sure that they comply with the terms mandated by the settlement and do not religiously proselytize or coerce the children in their care.

The settlement still must be approved by U.S. District Judge Charles R. Simpson III. Assuming that happens, state officials will have 90 days to modify regulations and for child placing agencies to comply.